Rent income & related entities

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#1
juro  
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My client owns several single-member LLC-type entities that all operate under one roof, in a single office suite. Rent income is recorded, but to me they are only cash transfers, and this rent income gets reported on the owner's schedule E.

is this common?
 

#2
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juro wrote:is this common?


For legal reasons yes.

However, for federal income tax purposes, if Individual A owns LLC B and LLC C, both LLCs are disregarded for federal income tax purposes, and there are rent payments between the LLCs, the rent arrangement is ignored for federal income tax purposes.

Really it's just a cash movement from one pocket to another of the owner. There's no holistic revenue or expense.

juro wrote:this rent income gets reported on the owner's schedule E.


Probably not, but we don't have enough facts.
 

#3
juro  
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ManVsTax wrote:
juro wrote:this rent income gets reported on the owner's schedule E.


Probably not, but we don't have enough facts.


But is was in fact reported on the year 2018 personal returns.
 

#4
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juro wrote:
ManVsTax wrote:
juro wrote:this rent income gets reported on the owner's schedule E.


Probably not, but we don't have enough facts.


But is was in fact reported on the year 2018 personal returns.


So they did it wrong. This is a scheme to shelter income that would otherwise be subject to SE tax. If they want this treatment, they have to establish a separate taxable entity, like an S-corp.
~Captcook
 


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